- BIOFUEL - AN ALTERNATIVE FOR THE FUTURE - THE BRAZILIAN CASE - Mauricio Tolmasquim EPE Empresa de Pesquisa Energétic Company for Energy Researc Presiden Geneva, Nov 2006
Motivations to Increase Trade of Biofuels Reduce the oil dependence from Middle East; Introduce other developing countries into the scene as a suppliers and help the distribution of the wealth; Reduce the emission of GHG; Replace the toxic additives (MTBE, ETBE, tetraethyl lead) by the ethanol. Futhermore, ethanol is a very good octane booster and oxygenated for gasoline and requires no engine modification. 2
The Biofuels Directive Targets 3
The Brazilian Energy Sector Domestic Energy Supply Structure OECD Countries (2003) 6.0 94.0 World (2003) 13.3 86.7 Brazil (2005) 44.5 55.5 Renewables Non-renewables 0% 20% 40% 60% 80% 100% Source: Brazilian Energy Balance, EPE, 2006 4
The Brazilian Energy Sector 2005 Domestic Energy Supply Structure Sugarcane and by-products 13.7% Other renewables 15.9% Oil and by-products 38.6% 14.9% 6.4% 9.4% Hydraulic and Electricity 1.2% Uranium Coal Natural Gas Source: Brazilian Energy Balance, EPE, 2006 5
The Brazilian Energy Sector Total Greenhouse Gas Emissions (*) 2.5 2.36 2.37 2.0 ton CO 2 / toe 1.5 1.0 1.57 0.5 0 World OECD Countries Brazil Source: Key World Energy Statistics, 2005 published by International Energy Agency (*) CO 2 emissions from fuel combustion only, calculated using IEA s energy balances and the Revised 1996 IPCC Guidelines toe: ton oil equivalent 6
Why biomass from sugarcane is an effective alternative Sugarcane presents several advantages Renewable energy source Safe and efficient Easy to produce in large scale Low pollutant Fuel Jobs generated Ethanol 2,190 Gasoline 600 Special gasoline 100 Generate new jobs, specially in the rural area High productivity and low environmental impacts Low consumption of energy in the production process 1 unit in to 8 unit out, in comparison to 1 to 1.3 for corn, for example Ethanol introduction in consumer market is easy and has relatively low production cost it can be use pure or mixed with gasoline production cost at the mill (w/o taxes): R$ 0,65/liter (US$ 0.28/liter) 7
Ethanol in The World The World's Largest Producers (2005) Source: Licht, F. O. 2006
Sugarcane bioenergy potential Forecasts for World Ethanol Market 2010 10 9 liters Country/Region Supply Demand Balance BRAZIL 26.0 21.5 4.5 United States 24.0 24.5-0.5 European Union 7.2 10.0-2.8 China 4.0 4.5-0.5 Others 7.5 8.2-0.7 TOTAL 68.7 68.7 Source: Nybot and Canaplan Projections 8.7 x 10 9 liters of ethanol ~ 4.8% of current world gasoline consumption 9
The Ethanol History in Brazil Stages of Brazilian Ethanol Program 10
Technological progress 80 Productivity more cane less area more ethanol less cane 70 60 ton cane / ha 50 40 liters ethanol / ton cane (for ethanol) Current Best Performance * 89 ton cane / ha 86 liters ethanol / ton cane * In Southeast region 30 First Steps Consolidation Stagnation Redefinition Current Phase 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: IBGE and UNICA In 70s, ethanol production was equivalent to 16.6 boe/ha 11
Profile of Brazilian sugarcane sector Sugarcane cultivated area: 5.5 billions ha Ethanol production capacity: 20 millions m³/year Number of farmer: 60,000 Number of industrial plants (all private owned): 324 Only ethanol producers: 50 Only sugar producers: 22 Ethanol and sugar producers: 252 Productivity: 2.6% per year Direct jobs: 1 million 12
Profile of Brazilian sugarcane sector Brazil is the largest exporter of sugar (38% of world market share) and ethanol (50.4%) Brazil (2004/2005) Sugarcane production 381.4 millions ton Ethanol production 15.2 millions m 3 Ethanol domestic consumption 13.5 millions m 3 Ethanol exportation 2.4 millions m 3 Current production capacity 20 millions m 3 Source: Ministry of Agriculture, 2006 61% of production volume < 2% of production volume 3 to 5% of production volume 5 to 10% of production volume 13
Profile of Brazilian sugarcane sector Sugarcane production perspectives Sugarcane production Crop-Year 10 6 t 2004/2005 381 2010/2011 570 2014/2015 715 Future areas for sugarcane culture expansion Plants Source: Ministry of Agriculture, 2006 14
The Market # of vehicles 2,000,000 1,800,000 1,600,000 Brazilian Domestic Sales of Light Vehicles (unit) Others Gasoline Ethanol 1,400,000 1,200,000 1,000,000 Subsides Reduction 800,000 600,000 400,000 200,000 0 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 Source: ANFAVEA, 2006
Flexible Fuel Vehicles # of vehicles 1,800,000 1,600,000 1,400,000 1,200,000 1,000,000 Flex fuel introduction Brazilian Domestic Sales of Light Vehicles (units) Diesel Flex fuel 3.7% 22% Ethanol 54% Gasoline 800,000 600,000 400,000 74% 200,000 0 2003 2004 2005 2006 Flex fuel vehicles has already 74% of domestics sales (Jan to May) Source: ANFAVEA, 2006 16
Production Expansion Respecting The Environment Occupied area by sugarcane culture Savanahs and fields Cities, rivers and others Others Forests Agriculture and pastures Occupation Forests Savanahs and fields 10 6 ha 468 77 % 54% 9% Sugarcane potential area Cities, rivers and others 17 2% Sugarcane today Agriculture and pastures 299 35% Sugarcane today 5.5 0.6% Sugarcane potential 102.0 12% Others BRAZIL 197.0 851 23% 100% 17
The Biodiesel Production & Use Program CHALLENGE: To implement a self-sustainable energy project, considering price, quality and guaranteed supplies of BIODIESEL, fostering income generation with social inclusion. ENERGY BIODIESEL Technology Base: Agricultural, Industrial and Fuel Use Environmental Social Market 18
Sources for Biodiesel in Brazil Availability of Seed Brazil 2005 (1000 t) Soy 53.426 Cotton 1.671 Palm 900 Castor 152 Peanut 117 Sunflower 107 Rape 55 Percentage 94,6 % 3,0 % 1,6 % 0,3 % 0,2 % 0,2 % 0,1 % 56.428 19 Source: Data from Ministério da Agricultura, Abastecimento e Pecuária
Biodiesel: regulatory framework Law 11.097/2005: Establishes minimum percentages to mix biodiesel to diesel, besides the monitoring on the introduction of this new fuel into the market. 2005 to 2007 2% Authorized 2008 to 2012 2% Mandatory From 2013 on 5% Mandatory Potential Market: 840 million Liters/year Sound Market: 1 billion Liters/year Sound Market: 2,4 billion Liters/year 20
BIODIESEL PRODUCTION TAX POLICY Family Farms in North, Northeast and Semi-Arid Drylands with castor beans or palms BIODIESEL FOB Price (R$1.92/l) Family Farms North, Northeast and Semi-Arid Drylands with castor beans or palms Any producer Fossil DIESEL FOB Price (R$1.60/l) Fossil Diesel TOTAL EDERAL TAXES R$/liter 0.0 R$/liter 0.07 R$/liter 0.151 R$/liter 0.218 R$/liter 0.218 21
State Purchase Policy The State Oil Company (Petrobras) purchases biodiesel in public auctions to foster the production in this nonmandatory period till 2008 January. The Regulatory Agency stipulates the maximum amounts of biodiesel to be acquired at the auctions. The BIODIESEL PRODUCERS must be compliant with the Social Fuel Seal to participate of the auction. The Social Fuel Seal is awarded to the Producers that buy part of their feedstock from familiar farmers. 22
CARAMURU (30,000 m³) BARRAAlcool (16,629 m³) Sellers: biodiesel producers BIOMINAS (2,651 m³) AGROPALMA (7,200 m³) FIAGRIL (27,500 m³) AGROSOJA (5,000 m³) BRASIL ECODIESEL (488,000 m³) roducers: BINATURAL (1,307 m³) SOYMINAS (8,700 m³) 1 st auction = 70,000 m3 2 nd auction = 170,000 m3 3 rd auction = 50,000 m3 4 th auction = 550,000 m3 RENOBRAS (825 m³) FERTIBOM (6,000 m³) BIOCAPITAL (28,658 m³) BSBIO (70,000 m³) Producers 1 st auction Producers 2 nd auction Producers 3 rd auction Producers 4 th auction GRANOL (58,300 m³) PONTE DI FERRO (22,430 m³) 23
Main tendencies: 2008 onwards 2005 to 2007 B2 authorized, but not compulsory Public Auctions 2008-2013 2013 onwards B2:Compulsory B5:Compulsory use of B2 mix use of B5 mix Possibility of bringing forward the compulsory use of B3, B4, B5 and Bx mixtures; End of public auctions; (semelhante atualmente à comercialização do álcool) Direct negotiations between producer and distributor (similar to the present method of commercialization of alcohol). 24
The Commoditization of Biofuels CONDITIONS Increase the number of countries producers of biofuels Single International Standard; Make the biofuels competitive in other developing countries; Develop new techologies: (crops, industrial, ethanol from cellulose, automobile); Avoid tariffs and non-tariffs barriers. 25
Thank you! EMPRESA DE PESQUISA ENERGÉTICA - EPE http : // www. epe. gov. br Av. Rio Branco, 1 11 o andar 20090-003 Rio de Janeiro RJ Tel.: + 55 (21) 3512-3100 Fax: + 55 (21) 3512-3199